Publications

Redefined Role of Profit in Economic Substance Doctrine

New York Law Journal

Learned Hand famously opined that “[a]ny one may so arrange his affairs that his taxes shall be as low as possible.” There is, however, a line between legitimate tax avoidance and illegal tax evasion and, in drawing that line, the IRS has long challenged attempts by taxpayers to reduce their tax liability by executing transactions that lack economic substance. In this article, I discuss the increasing focus of the economic substance doctrine on the proportionality between the potential profits to be derived from a transaction and the corresponding tax benefits, as well as the effect this changing focus will have on future cases.